NRG Energy outlines value of Edison Mission Energy takeover

NRG Energy (NYSE: NRG) officials said in a Jan. 7 conference call that the planned takeover of Edison Mission Energy is moving through the regulatory review process and should close in the first quarter of this year.

Edison Mission Energy and related companies, including Illinois coal plant operator Midwest Generation, sought Chapter 11 bankruptcy protection in December 2012. Last fall, NRG announced a deal to buy Edison Mission Energy and most of its assets, including the Illinois coal plants or leases related to them. Those coal plants are Powerton, Joliet, Waukegan and Will County, representing about 4,300 MW of capacity.

NRG noted during the 41-minute conference call that the Midwest Gen coal plants are largely fired with Powder River Basin coal and that NRG will assume the Midwest Gen commitment to spend up to $350m for new emissions controls on that capacity.

Assets that NRG would pick up included 1,775 MW of gas, oil and wind capacity. In California, there is 1.1 GW of gas-fired capacity involved in this deal. In the PJM Interconnection region, there is 4.7 GW of capacity, mostly the Midwest Gen coal plants in Illinois.

NRG President and CEO David Crane said during the call that unlike the recently-acquired GenOn Energy, Edison Mission Energy is underpinned by a number of long-term contracts, making the Edison Mission Energy asset buy a “win-win” for NRG shareholders. He noted that about 1,600 MW of these to-be-acquired assets are eligible to be turned over to the recently-created affiliate NRG Yield.

Crane argued that the country is now several years into a “cyclical” downturn for power demand, meaning it can secure these new assets now at a pretty low price, ahead of the inevitable cyclical upturn.

NRG plans to review each asset after the buy and prioritize capital spending based on those reviews. NRG will look at “fuel conversions” at the Illinois coal plants, said an NRG official, but he declined to get more specific.

NRG hinted in the conference call presentation, which is something that Edison Mission Energy has already indicated to its bankruptcy court, that the Big Sky wind farm and the small AmBit coal-fired power plant in West Virginia are “non-core” and subject to outside sale. “NRG has no obligation to support these entities,” said the presentation slides. Big Sky Wind LLC owns and operates a 240 MW (nameplate) wind facility in Ohio, Ill., in the PJM region. American Bituminous Power Partners LP (AmBit) is partially owned by EME and it owns and operates an approximately 80 MW (summer rating) waste coal-fired facility in Grant Town, W.Va., in the PJM region. The voting interests in AmBit are indirectly held by EME (50%), American Hydro Power Co. (10%) and East Power Co. (40%).

There are various other aspects of this deal coming to light outside of the NRG announcements. For example, Edison Mission Energy’s Valle del Sol Energy LLC told the California Energy Commission on Jan. 6 that the status of a shelved 500-MW gas project hangs right now on the purchase of Edison Mission Energy and its related assets, including this project, by NRG. The California commission in June 2013 agreed to continue a hold first put on in 2011 of the review process for the Sun Valley Energy Project. This a natural gas-fired peaker that will be located in the City of Menifee, Calif.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.